Interest Rate Hike Losses

“According to an analysis by Goldman’s Charles Himmelberg, if rates rise by the Jamie Dimon-referenced 1 percentage point, the market value loss would be between $1 and $2.4 trillion! Putting this loss in context, even the smaller $1trn loss would be over 50% larger than the market value lost in the 1994 bond market selloff in inflation-adjusted terms, and larger than the cumulative credit losses experienced to date in the non-agency residential mortgage backed securities market. And this is only only as a result of a 1% interest rate increase: assuming full normalization of rates to their historical level of 3.5%, and the level of mark-to-market losses climbs to a staggering $3 trillion.”